Innovation is not pervasive in most family businesses in Singapore, revealed KPMG's Family businesses in the digital economy report.
Two thirds (66 percent) of 100 local family-owned businesses surveyed said that only their management team thinks about innovation. Many family businesses thus have a 'closed ecosystem' where idea generation is centralised amongst key individuals.
The report also found that 53 percent of the respondents do not have any existing plans to inculcate the culture of innovation, despite national calls to sharpen competitiveness and increase productivity. However, 25 percent of them actively encourage employees to try out new ideas and challenge the status quo.
"With the rapid march of digitisation and global competition, an innovation mindset must be ingrained into a company's culture where every employee is encouraged and empowered to think about their job, about the products and processes they touch - and how they can be improved and done more efficiently or differently," said head of Tax Chiu Wu Hong, who also heads the Enterprise practice at KPMG in Singapore.
Even though 75 percent of family businesses agree that there is a need for digitalisation, they do not fully understand the significance, potential benefits and relevance of digitalisation to their business.
Seven in 10 think of digitisation as e-commerce or online business transactions, while 59 percent regard digitisation as a platform only for engaging customers.
Only 44 percent see digitisation as a more holistic process of applying data analytics.
According to the report, resistance to change was more often cited as the most significant barrier for younger family businesses (57 percent). For more mature family businesses, limited resources was the main challenge.
Commenting on the findings, Chiu said: "Most local enterprises don't always see innovation as a 'must have'. More often than not, it is a 'good to have' -- the longstanding challenge of rising business costs and resource constraints are hard enough to manage and innovation could be regarded as less of a priority."
"They [also] believe that setting up digital solutions is expensive and difficult given their limited manpower. This misconception has left many business owners turning away potential customers, hurting their growth and overall revenue potential."
"[They need to understand that there are] many digital solutions that can help them become more efficient and effective. Better use of data can also help them make better business decisions," he added.
Understanding these issues, the Singapore government launched the SMEs Go Digital programme in April to help SMEs build stronger digital capabilities. It also announced at the Budget 2017 that it is allocating S$2.4 billion to help equip SMEs and workers with digital mindsets, and build a strong infrastucture that will foster the growth of innovative technologies and solutions.
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